ARGOS and Homebase owner Home Retail Group said it was ramping up investment in its stores yesterday after revealing an 11 per cent annual profits slump.

Despite continued “economic uncertainty” the group will spend up to £150million this year, double last year’s figure, mainly on Argos stores to fend off competition from supermarket rivals, the internet and newcomer Best Buy.

Argos managing director Sara Weller said the refurbishing of 130 stores this year would leave customers with a “better place to shop”.

Changes will include more products on display and product information, “spacious” browsers, more cash/credit card payment kiosks and an “enhanced” website.

“Two thirds of all shoppers came to Argos last year. We want them to come more regularly,” Weller said. Chief executive Terry Duddy said cost cuts, including job losses, had left it in a strong financial position. “We have got the money to invest,” he said. “We have confidence in the business regardless of the uncertain economy and government plans on tax.” Its cashpile has also allowed it to plan a £150million return to shareholders. Duddy denied it was a defensive move to ward off suitors rumoured to include Asda. “We don’t speculate on rumours,” he said.

The group reported an 11 per cent fall in profit to £293million in the year ended February 27, hit by tougher consumer spending and the weak pound. It said it had gained market share with total sales up 2 per cent to £6billion helped by a 2.7 per cent hike in same-store sales at Homebase, its best showing in five years. However Argos same-store sales dropped 2.1 per cent. Its shares fell 4p to 277p.

Duddy said big ticket items, especially kitchens, had driven Homebase sales as had its “fantastic” grow-your own range of vegetables. Argos was boosted by TVs, computers and toys. “Homebase attracts a more middle-England shopper,” said Duddy. “They have been less affected by the recession.” Arden Partners’ analyst Nick Bubb said: “We are growing more nervous about Argos’ future.”